MW Why oil prices could rise as U.S.-Iran tensions swell
By Myra P. Saefong
The Strait of Hormuz, a critical chokepoint for global oil markets, is back in focus for oil traders
Oil flow through the Strait of Hormuz averaged 20 million barrels per day in 2024, or about 20% of global petroleum liquids consumption, according to the U.S. Energy Information Administration.
Iran was stealing some of the world's focus away from Venezuela on Monday, with Wall Street closely monitoring the Trump administration's potential next moves regarding Tehran.
With deadly anti-government protests gripping the Iranian regime, Trump on Monday said he may consider diplomacy, but also that steps could be taken to militarily intervene in Tehran's crackdown, according to the Wall Street Journal.
Iran matters to Wall Street because it's one of the world's largest oil producers and it shares control over the Strait of Hormuz - a crucial maritime passage for crude transport that connects the Persian Gulf with the Gulf of Oman and the Arabian Sea.
Iran tensions swung the spotlight away from former Venezuelan President Nicolás Maduro to Iran's Supreme Leader Ayatollah Ali Khamenei, as "weekend protests and brutal crackdowns sparked fresh oil supply fears," said Manish Raj, managing director at Velandera Energy Partners.
New reports estimate that more than 500 protesters have died in anti-government demonstrations in Iran. Senior administration aides at the White House have reportedly been urging Trump to give diplomacy a try before retaliating militarily.
Trump on Sunday said Tehran was willing to enter negotiations over its nuclear program and that a meeting is being set up, though the U.S. was still looking at "very strong options" he could authorize before such discussions, according to the Journal.
On Monday, Trump said on social media that he had ordered 25% tariffs against any country doing business with Iran. That could include countries including China, India and Turkey.
For the oil market, the fatalities in Iran and calls for strikes among oil-industry workers there have "raised concerns that millions of barrels per day of exports could be at risk," leading to a potential rise in prices, said Alex Pierce, commodity analyst at Schneider Electric, in a market update.
How much oil does Iran control?
Iran is among the biggest oil producers in the world. In 2023, it was the world's 9th biggest producer of oil, with output of nearly 4 million barrels a day, with a 4% share of the world's total output, according to the Energy Information Administration.
"Although Iranian authorities have claimed the situation is under control, market sentiment remains cautious," Schneider Electric's Pierce said. "Even short-term escalation could disrupt flows or increase insurance costs for shipments through the Gulf."
Iran also has the ability to halt the flow of oil through the Strait of Hormuz. Oil flow through the strait averaged 20 million barrels per day in 2024, or about 20% of global petroleum liquids consumption, according to the EIA.
Read archived story on the importance of the Strait of Hormuz
Those threats might sound familiar. Global oil markets faced the same issue as recently as June when news reports indicated Iran's parliament had endorsed closing the strait.
Importantly, stopping the flow of oil through the strait could be a move of last resort for Iran, said Denton Cinquegrana, chief oil analyst at the Oil Price Information Service, or OPIS. (OPIS is a unit of Dow Jones, the publisher of MarketWatch.) "If you are going out, why not go out in a blaze of glory," he said.
Any halt to the flow of oil through the Strait of Hormuz would be a "big event for the world market," said Cinquegrana. Iran wouldn't "be making any friends" in doing so, as many nations rely on the strait to move shipments of oil.
Velandera Energy's Raj said any Trump administration strike on Iran risks Tehran "playing its ace - disrupting the Strait of Hormuz."
Focus is on any supply shocks
The flow of oil through the strait has yet to ever fully stop. "No full blockage has ever happened," said Raj. "Even the 1980s Tanker War saw naval attacks," he said, but not a shutdown. Yet even then, a "partial squeeze" spiked prices as ship owners refused cargos, he said.
"Today's market yawns at the risk only because Iran talks tough, but hasn't pulled the trigger, ever," Raj said.
Still, with recent U.S. moves to take control of Venezuela's oil industry, Iran could add a disturbing twist to the global market for the commodity.
"Double trouble is not reality," said Raj. The U.S. controlling both Venezuela and Iran's oil simultaneously is "pure fantasy at this time, but pundits have begun imagining what it'd be like."
"The supply shocks from either would already rock the boat; both together would capsize global markets like a perfect storm," said Raj.
Oil prices on Monday were steady despite recent developments in Iran. U.S. benchmark West Texas Intermediate oil (CL.1) edged up by 0.6% to settle at $59.50 a barrel on the New York Mercantile Exchange, while global benchmark Brent crude (BRN00) finished the session at $63.87 a barrel, up 0.8%, on ICE Futures Europe.
-Myra P. Saefong
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(END) Dow Jones Newswires
January 12, 2026 19:48 ET (00:48 GMT)
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